Nusa Dua, Indonesia, 22 September 2011: Reuters

Robust Asian demand will keep intact a bullish outlook for corn and soybean in the long term, although current high prices have hit a ceiling as investors steer clear of economic uncertainty in developed nations, industry officials said this week.

Rising demand for feed in emerging economies, boosted by population and economic growth, will be the key driver for soybean and corn for years to come, as consumption swings away from staple grains towards meat, participants at an industry meeting in Indonesia said.

"As incomes rise, you'll have a more diverse food basket coming from different parts of the world," said Margarita Escaler, a research fellow at the National Institute of Education in Singapore.

"You'll have increased consumption per capita for wheat, rising popularity of convenience foods and beverages. You'll also see a tendency for diets to become very similar across developed countries in Asia, towards more Westernization." The hottest summer in more than half a century in the United States has contributed to strong corn prices in recent months, prompting some traders to speculate that corn buyers will look beyond the top supplier.

Global soybean production in 2011/12 is likely to reach about 265 million tonnes, newsletter Oil World forecasts, with the U.S. 2011/12 soybean crop likely to fall to 88.5 million tonnes from 90.6 million in 2010/11. The forecast comes at a time of growing worries about the debt and economic woes of both Europe and the United States.

"The debt problems in Europe and the U.S., as well as financial and economic uncertainties, support a more bearish scenario," Thomas Mielke of Oil World said on the near-term outlook for soybean.

Industry players also weighed the chances of China, the world's second-largest consumer, looking to import U.S. or Argentine corn. Concerns about tight U.S. corn stocks have pushed Chicago Board of Trade corn futures to record highs recently. Frontmonth corn futures hit an all-time peak in June just below $8 a bushel.

"China is a wild card," said Adel Yusupov, Southeast Asia regional director at the U.S. Grains Council, adding that demand from southeast Asia was a crucial factor not to be ignored.

"All our eyes are on China, and we are a little bit forgetting about the importance of Southeast Asia. Overall, in terms of world corn imports, ASEAN presents much bigger potential than China."

Ethanol demand for corn will also influence benchmark prices, as the alternative fuel industry uses about 40 percent of the U.S. corn crop for feedstock, provoking criticism from food and livestock producers who say it drives up prices.

The USDA predicts demand for corn from the livestock, ethanol and export sectors will shrink the U.S. stockpile to its smallest in 16 years by next summer. Beyond that, however, things may be set to change. "One of the reasons why I think (crude) oil and corn will both be down next year, is that we've had this increasing use of corn for ethanol," said Paul Aho, a poultry economist at Poultry Perspective, who forecast corn prices to fall to $5 a bushel in 2012/2013, with crude at $75 a barrel.

"The only reason it's going to be up in this current crop year, is because of a bad crop. Next year, with a good crop, we're headed in the other direction - ethanol will become less supportive for corn," said Aho.

Sustainability and food security concerns are in focus, with increasing yields seen as key to meeting demand from growing Asian populations, rising middle classes and continued urbanization.

"As Asians live more and more in cities, the role of urban food security is going to be even more important -- as we saw in the 2007/2008 crisis, there were food riots," said Escaler, referring to global food protests in 2008 after the price of wheat and other farm commodities climbed steeply.

But the region needs to consolidate small farms to boost yields, ease food security problems and meet rising demand. Farmers holding fewer than two hectares continue to dominate the sector in Asia, which makes up more than 87 percent of the world's 500 million small farmers, she added.

"If we've got 500 million small farmers, we've got to be able to make these farmers more entrepreneurial, and this is why the private sector plays a key role," Escaler said. "Food security cannot be addressed without the private sector."

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